Rebounding Japan beckons investors

A Christian Dior store in Nagoya, Aichi prefecture. Recent news that Japan's economy saw a strong 3.9 per cent year-on-year growth in the first quarter of this year is lending credibility to the notion that recovery is gradually picking up pace on th
A Christian Dior store in Nagoya, Aichi prefecture. Recent news that Japan's economy saw a strong 3.9 per cent year-on-year growth in the first quarter of this year is lending credibility to the notion that recovery is gradually picking up pace on the back of Abenomics.PHOTO: BLOOMBERG

Weak yen, vibrant bourse represent opportunities for S'pore firms, traders

JAPAN is poised to return to Singapore investors' radar following fresh signs of firmer economic recovery, as its massive consumer market presents opportunities for business expansion while the equity market beckons with a vibrant outlook.

Recent news that Japan's economy saw a strong 3.9 per cent year-on-year growth in the first quarter of this year - much higher than the 2.4 per cent advance estimate - is lending credibility to the notion that recovery in the world's third largest economy is gradually picking up pace on the back of Abenomics.

As a result of Japanese Prime Minister Shinzo Abe's stimulus measures, the weak yen that has been enticing capital investments in Japan is also attracting some Singapore companies to increase their footprint there.

One of them is Singapore plastic recycler Winrigo. Its operations director Teri Teo said: "Because of the softening yen, I now procure more plastic materials from Japan to be manufactured and sold to regional markets, including back to Japan where demand for green products is always very strong."

The company has upgraded its previously external agent-driven network in Japan to a marketing office.

"It's not an easy market to enter, but there are certainly niches for opportunities. Besides green technology, I also see hospitality and food and beverage sectors being attractive to Singapore companies due to the vast number of tourists there," he added.

As of last year, Singapore was the third largest source of foreign investments for Japan, with the amount reaching around $1.8 billion, said Mr Masaya Hasebe, managing director of Japan External Trade Organisation in Singapore.

"Abenomics has so far been successful, but to sustain Japan's recovery, the government is entering the next phase of reforms to encourage business investments. For instance, we are reducing the effective corporate tax rate, and liberating electricity retail market and approval processes," he said.

To encourage companies to invest and raise wages, the Abe administration is cutting Japan's effective corporate tax rate by 3.29 percentage points over two years from its current level of around 35 per cent, beginning in April this year.

A new Pharmaceuticals and Medical Devices Act was also introduced in November last year, which loosens the certification requirements for medical device products.

Mr Hasebe said Japan is "no longer the expensive market that foreigners think it is. The office rental rate in Tokyo, for example, is now comparable if not lower than that in Shanghai and Singapore... This is indeed a great time to invest in Japan".

Meanwhile, an even more encouraging scene has been unfolding in Japan's equity market, where stock performances have been ahead of the economy's curve.

Japan's benchmark Nikkei 225 has gained around 37 per cent to 20,407.08 in the last 12 months, boosted by the bullish corporate sentiments, Jefferies' global equity strategy head Sean Darby told The Straits Times.

"Japanese earnings revisions have shown consistent upgrades over the past three years, both on a monthly and six-monthly moving average," he said.

He added that companies continue to engage in share buybacks, boosting earnings per share.

He said: "Dividend per share growth should be in the high teens this year while returns on equity remain just below 10 per cent."

whwong@sph.com.sg